AbbVie (NYSE:ABBV) and Merck & Co., Inc. (NYSE:MRK) are both large-cap medical companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, profitability, institutional ownership, risk, earnings, dividends and analyst recommendations.
Analyst Ratings
This is a breakdown of recent recommendations and price targets for AbbVie and Merck & Co., Inc., as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
---|
AbbVie | 1 | 4 | 16 | 0 | 2.71 |
Merck & Co., Inc. | 0 | 2 | 12 | 0 | 2.86 |
AbbVie currently has a consensus price target of $112.50, suggesting a potential upside of 1.48%. Merck & Co., Inc. has a consensus price target of $95.3571, suggesting a potential upside of 17.75%. Given Merck & Co., Inc.'s stronger consensus rating and higher probable upside, analysts clearly believe Merck & Co., Inc. is more favorable than AbbVie.
Profitability
This table compares AbbVie and Merck & Co., Inc.'s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
---|
AbbVie | 18.16% | 439.24% | 13.22% |
Merck & Co., Inc. | 24.33% | 53.83% | 16.83% |
Insider and Institutional Ownership
67.5% of AbbVie shares are owned by institutional investors. Comparatively, 72.9% of Merck & Co., Inc. shares are owned by institutional investors. 0.1% of AbbVie shares are owned by insiders. Comparatively, 0.3% of Merck & Co., Inc. shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Dividends
AbbVie pays an annual dividend of $5.20 per share and has a dividend yield of 4.7%. Merck & Co., Inc. pays an annual dividend of $2.60 per share and has a dividend yield of 3.2%. AbbVie pays out 58.2% of its earnings in the form of a dividend. Merck & Co., Inc. pays out 50.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. AbbVie has raised its dividend for 49 consecutive years and Merck & Co., Inc. has raised its dividend for 1 consecutive years. AbbVie is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Valuation and Earnings
This table compares AbbVie and Merck & Co., Inc.'s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
---|
AbbVie | $33.27 billion | 5.88 | $7.88 billion | $8.94 | 12.40 |
Merck & Co., Inc. | $46.84 billion | 4.37 | $9.84 billion | $5.19 | 15.60 |
Merck & Co., Inc. has higher revenue and earnings than AbbVie. AbbVie is trading at a lower price-to-earnings ratio than Merck & Co., Inc., indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
AbbVie has a beta of 0.84, suggesting that its share price is 16% less volatile than the S&P 500. Comparatively, Merck & Co., Inc. has a beta of 0.43, suggesting that its share price is 57% less volatile than the S&P 500.
Summary
Merck & Co., Inc. beats AbbVie on 9 of the 17 factors compared between the two stocks.